(The Center Square) State legislators announced a collection of bills that target the wealthiest citizens in the U.S. across eight states. Yet many experts don’t expect most of the country’s wealthiest to pay up if any of these bills pass.
The targeted states include Washington, California, Illinois, Connecticut, Hawaii, New York, Maryland and Minnesota. The bills share the same goal of increasing taxes on the wealthiest in the U.S.
In six out of the eight states, the proposed bills essentially seek to change the rules on capital gains and estate taxes.
For example, the New York state proposal would impose a nearly 30% tax on New York City’s wealthiest residents’ capital gains income. That is twice as high as the 20% federal tax on long-term capital gains, according to Jared Walczak, the vice president of state projects at the Tax Foundation.
The two outlier states are Washington and California, which are proposing direct wealth taxes.
California Lawmaker Alex Lee is leading the state’s latest proposal that would institute a 1% wealth tax on personal assets above $500 million and 1.5% on assets above $1 billion.
Washington state’s proposed bill would create a property tax on “extreme” wealth derived from the ownership of stocks, bonds and other financial assets. The first $250 million of assessed value is exempted, meaning only the wealthiest people residing in Washington would pay it.
Collected revenue would be dedicated to education, housing, disability services and tax credits for Washington’s working-class families.
In an opinion piece published on the website of the alt weekly newspaper The Stranger, Summer Stinson, executive director of the Washington-based think tank Economic Opportunity Institute, said that wealth taxes are a solution to growing poverty rates in the state.
According to Stinson’s statistics, 25% of Washington residents are living in poverty. That equals to a yearly income of $46,060 for a family of three. Stinson proposes a state tax on stocks, bonds and mutual funds of some of the wealthiest Washingtonians at a rate of 1% of each resident’s wealth would raise over $3 billion a year.
Revenue collected from a wealth tax would go towards housing, education, disability aid and more.
Stinson added that this tax would only affect 700 Washington state residents.
Wealth taxes are transparently in conflict with Washington state’s constitution, according to Walczak. But state legislators have attempted to target Washington billionaires in the past. Last year, a collection of Washington state senators proposed a bill that would impose a 1% tax on intangible financial property such as stocks, bonds, futures contracts and publicly traded options. That bill did not pass either house of the Legislature.
Jason Mercier, director of the Center for Government Reform at the Washington Policy Center, doubts that the state’s wealthiest will stick around if a wealth tax is implemented.
“Would you pay 1% based on the value of your total financial assets each year for the privilege of living in a state?” he asked rhetorically in an email to The Center Square. He said the bill’s sponsors believe “Washington’s wealthy will and that they’ll send the state more than $3 billion a year for this privilege instead of moving to a state without his privilege fee.”
Lee Schalk, the Vice President of Policy at the American Legislative Exchange Council, similarly said that Washington and the other seven states are continuing to push high taxes, which have already forced a number of taxpayers to move to other states.
“Unfortunately, these states are doubling down on the high tax and spend policies that have sent taxpayers packing in search of greater opportunity,” Schalk said to The Center Square in an email. “It was never more obvious than during the COVID-19 pandemic, when hundreds of thousands of individuals left states like California, New York and New Jersey and moved to low or no income tax states like Arizona, Texas, North Carolina and Florida.”
Notable billionaires that have moved from states liable to tax the wealthy include Elon Musk, who moved from California to Texas in 2021. Washington state’s wealthiest including Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates would be targeted with the state’s newly proposed tax.